Sales and Use Tax Annotations

Annotation 315.0766

(c) MISCELLANEOUS REPAIRS

315.0766Repair Parts Shipped Out of State. A company enters into optional maintenance contracts with purchasers of its equipment. The customer sends the part to be repaired to the company. The company sends the part to an out-of-state repairer. The repairer returns the repaired parts to the company and the company sends its technicians to the customer's location to install the parts. In some cases, the part may be sent by the company to the customer for installation by the customer. The out-of-state repairer sells parts to the company as part of the repairs. Since those sales occur outside California, sales tax does not apply. The tax, if applicable, is use tax. However, the storage of the parts in California for future use solely outside California is not subject to use tax. The installation of the parts by the company's technician is a taxable use. If the installation by the company occurs outside the state, tax does not apply. However, if the company ships refurbished parts to out-of-state customers for installation by the customer, tax applies at the time of shipment. This is because at the time of shipment, the company passes title to the part to the customer in California making a complete use of the part in meeting its obligation under the optional warranty. Such use does not come within the section 6009.1 exclusion. 12/6/93.

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